What will the rise of generics mean for the pharmaceutical industry?

Generics are on the rise again. Thanks to President Obama’s decision to increase access to them as a way of bringing less expensive treatments to the American public, the generics star is once again in the ascendant, and their production is now nearly 100 percent of their branded rivals.

What will this mean for the pharmaceutical industry? It depends on your point of view.

What will the rise of generics mean for the pharmaceutical industry?

Generic versions of branded products are nothing new – back in the 1920s, Bayer tried to prevent copycat versions of aspirin from reaching the market, but lost its fight in court. Generic drugs, however, were not always well tested for safety and effectiveness. As recently as the 1950s and early 1960s, drugs were allowed to go to market with the idea that if they caused severe side effects, they would be withdrawn. One tragic outcome of this policy were the widespread birth defects caused by the sedative thalidomide.

In 1962, the FDA introduced new regulations requiring extensive testing in humans before drugs could be sold to consumers. Although the rules also applied to branded products, generics producers had the additional hurdle of having to wait for the brand’s patent to expire before they could start testing. As a result, production of generics dropped to 35 percent of drugs with an expired patent.

Now generics are on the rise again. Thanks to President Obama’s decision to increase access to them as a way of bringing less expensive treatments to the American public, the generics star is once again in the ascendant, and their production is now nearly 100 percent of their branded rivals.

What will this mean for the pharmaceutical industry? It depends on your point of view. Companies whose main business is the production of generics champion their relative cheapness and the fact that they serve to increase competition. Makers of branded drugs – who have often invested millions in their R&D processes – argue that extended patent periods are necessary for them to recoup their investment. Without this, they say, drug development will dry up and we will miss the chance to discover valuable and potentially life-saving new treatments.

Who’s right? Most industry watchers are taking a wait and see approach, but with the President’s backing, it seems likely that generics are headed for a position of strength once more.